US Supreme Court rules against Biden administration student debt relief plan

Editor’s note: This report has been updated and includes Nebraska reaction.

WASHINGTON — The U.S. Supreme Court on Friday ruled that the Biden administration does not have the legal authority to enact a one-time student debt relief program, dealing a blow to the 40 million Americans who would have qualified for the program.

Last year, the Biden Administration rolled out a debt forgiveness plan for borrowers with federal student loans that would be a one-time cancellation of up to $10,000.

Those student loan borrowers who had received Pell Grants — federal aid to help low-income students pay for higher education — could qualify for an additional $10,000 in forgiveness, a policy that was meant to provide equitable relief to Black borrowers.

In a 6-3 decision, Chief Justice John Roberts, writing for the conservative majority of the court, deemed that a loan servicer in Missouri, the Higher Education Loan Authority, known as MOHELA, would have its revenue threatened by the debt relief.

Nebraska AG weighs in 

LINCOLN — Nebraska Attorney General Mike Hilgers on Friday celebrated the U.S. Supreme Court’s decision to block President Joe Biden’s one-time student debt relief program.

Nebraska was one of six states challenging the Biden debt relief plan, and the state’s solicitor general argued the case in February in front of the court.

Hilgers said at a news conference that the court “stopped a very significant, attempted, really breathtaking power grab” without congressional authorization.

“This protects one of the most important bedrocks of how we have all agreed to govern ourselves in this country, and it’s been a bulwark of freedom,” Hilgers said of the separation of powers. “Only Congress has the power of the purse.”

The state’s attorney general also celebrated the ruling as one against federal overreach, which he promised to fight “in the days and weeks and months ahead.”

Hilgers, seeking to show empathy with borrowers, said he and his wife took out student loans when they were starting their family. He said that, for families today, debt is “doubly worse” because of a high inflationary environment.

“I’m sure it’s very daunting, but I would say beyond that there is a right way and a wrong way in our system of government, and the ends don’t justify them,” Hilgers said.

By Nebraska Examiner intern Zach Wendling

The case was filed by Republican attorneys general of Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina, and they argued the Biden administration overstepped its reach and that MOHELA would be harmed by a loss of profits from federal student loan debt relief.

The court majority agreed. “(T)he Secretary’s plan would cost MOHELA, a nonprofit government corporation created by Missouri to participate in the student loan market, an estimated $44 million a year in fees,” Roberts wrote.

“MOHELA is, by law and function, an instrumentality of Missouri: Labeled an ‘instrumentality’ by the State, it was created by the State, is supervised by the State, and serves a public function. The harm to MOHELA in the performance of its public function is necessarily a direct injury to Missouri itself.”

‘Fight is not over’

President Joe Biden said in a statement that “the fight is not over” to help borrowers.

“I believe that the Court’s decision to strike down our student debt relief plan is wrong,” Biden said in a statement, adding that his administration plans to announce more efforts to help borrowers.

“I will stop at nothing to find other ways to deliver relief to hard-working middle-class families,” he said. “My Administration will continue to work to bring the promise of higher education to every American.”

Later Friday, Biden at a press conference said the Department of Education will begin the negotiated rulemaking process to “compromise, waive or release loans under certain circumstances” under the Higher Education Act. The HEA has a provision to allow the secretary of education to “waive or modify” federal student loans. The first public hearing is on July 18.

Biden also announced that the Department of Education has finalized its new income repayment-driven program known as the “Saving on a Valuable Education,” or SAVE. Biden said it will save borrowers more than a $1,000 a year.

The new income repayment plan would cap payments for undergraduate loans to 5% of an indivdiual’s income rather than 10%, and borrowers with loans from undergraduate and graduate school would pay between 5% and 10% of what they originally borrowed in undergrad.

Biden added that the Department of Education will create a temporary 12-month “on-ramp” repayment program for borrowers. Student loan repayments are set to begin Oct. 1.

“We know that figuring out how to pay these expenses can take time for borrowers, and they might miss payments at the front end as they get back into repayment,” Biden said.

But the top Republican on the Senate Health, Education, Labor and Pensions Committee, Sen. Bill Cassidy of Louisiana, and the chair of the House Education and the Workforce Committee, Virginia Foxx of North Carolina, released a joint statement condemning the Biden administration for this latest proposal.

Cassidy pointed out that the 12-month “on ramp” violates the agreement that Biden made with House Speaker Kevin McCarthy to end the pause on student loan repayments.

Earlier in the day, Republicans celebrated the decision. Missouri Attorney General Andrew Bailey held a Friday news conference, as did Nebraska Attorney General Mike Hilgers.

Bailey said the case was about “protecting working Missouri families from getting saddled with Ivy League debt,” and about “basic fairness.”

Dissenting justices

All three liberal Justices, Sonia Sotomayor, Elena Kagan and Ketanji Brown Jackson, dissented. Kagan, writing for the dissenters, did not agree with the finding the states had standing.

“The plaintiffs here are six States: Arkansas, Iowa, Kansas, Missouri, Nebraska, and South Carolina,” Kagan wrote. “They oppose the Secretary’s loan cancellation plan on varied policy and legal grounds. But as everyone agrees, those objections are just general grievances; they do not show the particularized injury needed to bring suit.”

The justices unanimously decided that a second case challenging the debt relief plan did not have legal standing. That case was brought by a two people with student loan debt who would either partially or entirely not qualify for the White House’s debt relief program. That case was backed by the conservative advocacy group  the Job Creators Network Foundation.

The Biden administration’s student debt relief plan has not only been challenged in the courts by Republicans, but also in Congress. The House and the Senate voted to overturn the policy through the Congressional Review Act, but Biden vetoed the resolution.

More than 16 million borrowers had already been approved for relief,  according to the Department of Education, before the agency was blocked from accepting more applicants following a nationwide injunction.

Repayments on federal student loan are set to resume Oct. 1, but interest accrual will begin starting Sept. 1, according to the Department of Education.

​​More than 43 million Americans have student loan debt, and the Federal Reserve estimates that the total U.S. student loan debt is more than $1.76 trillion.

A law passed in early June to address the nation’s debt ceiling codified that the White House would not be able to extend the pause on repayment for federal student loans unless approved by Congress.

For three years, there has been a pause on federal student loan repayment due to the coronavirus pandemic that was initially put in place by the Trump administration and extended by the Biden administration.

HEROES Act central to ruling

Roberts disagreed with the Biden administration’s argument that the federal HEROES Act allowed the secretary of education “to cancel $430 billion of student loan principal.” The HEROES Act, first enacted 20 years ago, was used by the Trump administration to suspend repayments on federal student loans at the onset of the pandemic.

During oral arguments in March, U.S. Solicitor General Elizabeth B. Prelogar — representing the Biden administration — argued that under the HEROES Act, the secretary of education can “waive or modify any statutory or regulatory provision” to help borrowers in a national emergency, such as the coronavirus pandemic.

Roberts said the administration went too far. “We hold today that the Act allows the Secretary to ‘waive or modify’ existing statutory or regulatory provisions applicable to financial assistance programs under the Education Act, not to rewrite that statute from the ground up,” Roberts wrote.

Roberts invoked the “major questions doctrine,” which means that if Congress wants to give an agency, such as the Department of Education, the power to make a decision of “economic and political significance,” it has to explicitly say so.

Roberts wrote that “the question here is not whether something should be done; it is who has the authority to do it.”

Congress reacts

Congress is unlikely to act on debt relief anytime soon, with control split between a Republican House and a Democratic Senate.

Senate Majority Leader Chuck Schumer, a New York Democrat, said in a statement that he was disappointed in the decision.

“This disappointing and cruel ruling shows the callousness of the MAGA Republican-controlled Supreme Court,” he said. “The hypocrisy is clear: as justices accept lavish, six-figure gifts, they don’t dare to help Americans saddled with student loan debt, instead siding with the powerful, big-monied interests.”

He called on the Biden administration to “do everything in its power to deliver for millions of working- and middle-class Americans struggling with student loan debt.”

Congressional Republicans hailed the decision.

Senate Minority Leader Mitch McConnell, a Kentucky Republican, said in a statement that the court’s decision “deals a heavy blow to Democrats’ distorted and outsized view of executive power.”

“The President of the United States cannot hijack twenty-year-old emergency powers to pad the pockets of his high-earning base and make suckers out of working families who choose not to take on student debt,” McConnell said.

GOP Sen. Bill Cassidy of Louisiana, who introduced the Congressional Review Act resolution to overturn the Biden administration’s debt relief policy, said in a statement that the court came to the right conclusion.

“This is an obvious but welcomed ruling,” he said. “President Biden’s student loan scheme does not ‘forgive’ debt, but unfairly transfers the burden from those who willingly took out loans onto those who chose not to attend college or already fulfilled their commitment to pay off their loans.”

‘Davastating’

But Democratic Sen. Raphael Warnock of Georgia said in a statement that the news was devastating.

“The Supreme Court’s decision to usurp the President’s executive authority to provide meaningful debt relief isn’t just bad for the everyday, hardworking Georgians who are being held back financially by crippling debt, but it’s also terrible for our entire economy and sets a dangerous precedent that binds the hands of the elected executive from taking action that reflects the will of the people,” he said.

The chair of the House Education and Workforce Committee, Foxx of North Carolina, said in a statement that she was pleased the Supreme Court had held the Biden administration accountable.

“Mr. President, good riddance to your illegal, economically disastrous taxpayer-funded bailout for the wealthy,” she said. ““This ‘one-time’ ‘cancellation’ of student loan debt was subterfuge for the radical Left’s ultimate goal of taxpayer-funded ‘free’ college for all.”

Foxx has held several hearings about the Biden administration’s student debt relief program, and has spoken against the policy since it was announced.

The top Democrat on the House Education and Workforce Committee, Bobby Scott of Virginia, said in a statement that millions of borrowers will be denied “the relief they need to make ends meet.”

“A college education should not depend on how much money a student’s parents make,” he said.

Scott said moving forward, Democrats should work to advance legislation to increase the funding of Pell Grants, lower interest rates for student loans and “make other critical reforms to make our student loan system work for students.”

Rep. Frederica S. Wilson of Florida, who is the top Democrat on the Higher Education and Workforce Development Subcommittee, said in a statement that the decision will perpetuate inequality and continue to harm vulnerable borrowers of color.

“It is no secret that the pandemic has disproportionately impacted communities of color, exacerbating inequalities,” she said. “Student debt cancellation would have been a bold step toward narrowing the racial wealth gap.”

Youth vote

The decision is likely to become an issue in the race for the presidency. Youth organizations that back student debt relief said they will use the ruling to rally support.

Cristina Tzintzún Ramirez, president of NextGen America, one of the largest youth voting organizations, said in a statement that “young voters will remember this come 2024.”

She added that, “heading into 2024, we will not forget the people who fight for us everyday and the people who would rather protect the pockets of shady billionaires.”

Another Gen Z-led organization, Voters of Tomorrow, echoed similar sentiments.

“We hope that the Biden Administration is able to negotiate a deal through Congress or take executive action to relieve student debt for all Americans,” the group said in a statement. “While we know it will be difficult with far-right politicians who have championed the removal of the plan, it is what is needed to remove the burden from millions of Americans.”

Kendra Cotton, the CEO of New Georgia Project, a voter mobilization group, said in a statement that in “the wake of this decision, New Georgia Project will double down on our efforts to connect the issues Black, brown, and young Georgians need to secure their economic futures — an increased minimum wage, better access to healthcare, and more affordable housing — to the importance of voting.”

Nebraska congressional delegation responds

All Republicans, Nebraska’s five congressional delegates reacted favorably to the U.S. Supreme Court decision. Each thanked the state’s Attorney General Mike Hilgers for his role in the challenge, which began under former Attorney General Doug Peterson’s tenure.

U.S. Rep. Mike Flood: “Congress will continue to work to make education more affordable and fight against Biden’s policies that are encouraging colleges to raise tuition and push working families and students further into debt.”

U.S. Rep. Don Bacon: “Even if this plan was constitutional, student loan forgiveness cheats Americans who paid off their loans and takes money from hardworking Americans to give it to those who willingly took out a loan…” 

U.S. Rep. Adrian Smith:  “President Biden’s plan to cancel student debt placed the ultimate burden of cost on those who could afford it least, benefiting the top 60 percent of earners while driving down the value of a college-level or technical education.”

U.S. Sen. Deb Fischer: “It’s time the administration work with Congress on policies that address the root causes of high tuition and provide the public with better access to more educational opportunities.”

U.S. Sen. Pete Ricketts:  “I am grateful the Supreme Court vindicated Nebraska’s argument and stopped this unfair and illegal scheme to shift unpaid debts to Americans who chose not to attend college or worked hard to pay off their own loans.”